'New settlements, such as Letchworth Garden City are needed in the countryside.' Photograph: David Sillitoe for the Guardian

Let building commence in hundreds of hamlets, villages, market towns and neighbourhoods in need of renewal. Begin repopulating the countryside with homes for lower-paid workers who service local economies. Recast the role of local government from supplicant to dynamic community shaper, enabler and urban developer.

Invoke the vision of the "garden city" pioneers and their proud record of creating what today would be called "sustainable communities": Ebenezer Howard's Letchworth, in Hertfordshire (1903), for instance, followed by nearby Welwyn and, subsequently, the 28 postwar new towns.

Be bold. Challenge the "development-at-no-price" lobby – sections of the National Trust, and their Daily Telegraph house journal – with a clear statement that an ambitious wave of new, and renewed housing, sensitively designed, is in the national interest.

Most of all, in today's budget, stress that England faces a housing crisis in meeting a growing demand for decent accommodation – and accept that a Whitehall department is failing miserably in its task. Eternal optimists can see signs that the chancellor, George Osborne, and a government ostensibly committed to growth, is accepting the need to be firm with entrenched interests opposed to a contentious national planning policy framework and a commitment to ill-defined "sustainable" development.

Tensions between the Treasury and the department for business, on the one hand, and a limp department for communities and local government – the Whitehall arm notionally in charge of housing and planning – on the other, are well-known.

Having arbitrarily scrapped the last government's planning regime and housing targets, communities secretary Eric Pickles has to explain why permission for just 115,000 homes was granted last year, a new "low" according to research by the Home Builders' Federation and half the 2006 level. Appallingly, just 16,334 social homes were approved in 2011, down 47% on the previous year, the research found. The federation believes that the mortgage indemnity scheme launched last week will lead to 100,000 more buyers. . Yet Cameron's "re-boot" of council house sales with discounts up to £75,000 further risks depleting social housing stocks, whatever the PM says to the contrary.

But beware of catchy ministerial statements which, two years ago, hailed the scrapping of Labour's "top-down" planning targets as long overdue, and now attack a "dysfunctional" planning system for slowing down building.

Moving from the lowest level of house-building since the 1920s to a developer free-for-all, with planning an afterthought, risks repeating the mistakes of the past, with identical, speculative housing plonked miles from amenities and public transport links – the antithesis of "sustainability".

The prime minister this week underlined the case for well-planned new settlements by calling for the beginning of consultation on "how to apply the principles of garden cities to areas with high potential for growth."

In short, it's easy to see why Osborne and the business secretary, Vince Cable, are underwhelmed by Pickles's department. They appear determined to ramp up building, seemingly at any price, with council planning departments the target of their ire.

But councils hold the key to driving forward development. They can morph into dynamic shapers of local economies by harnessing their assets, trading powers, and tapping other financial sources for house-building and much else. That is the ultimate challenge.